New York Fed Weighs a Wall Street Overseer, and Left Spies an Opening

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Demonstrators in Lower Manhattan this month as part of a protest organized by Fed Up, a group campaigning to make the Federal Reserve more responsive to labor concerns.CreditJeenah Moon for The New York Times

When William C. Dudley, the president of the Federal Reserve Bank of New York, announced that he planned to step down, progressives and pro-labor groups saw a rare opportunity to influence an important economic policy appointment over which President Trump has no say.

Almost immediately, they drew up a list of demands. They wanted someone who would focus more on promoting employment than on fighting inflation. They wanted a candidate who reflected diversity and who understood the New York region. They wanted a tough regulator who was independent of Wall Street. And they wanted an open search process that would give the public a voice.

Instead, the New York Fed’s board appears to be close to appointing John C. Williams, a Fed insider with little regulatory experience and no close connection to New York. He is also, like everyone to hold the job in the bank’s century of history, a white man.

“It’s like Exhibit A of how incredibly out of touch the Fed is with what is important and what’s happening in this country,” said Dennis M. Kelleher, president of Better Markets, a Washington-based group that has pushed for stricter financial regulation.

Mr. Williams, the 55-year-old president of the San Francisco Fed, is a respected economist and an influential policymaker whose research has drawn praise even from some people critical of his possible selection. He has helped push the Fed to rethink its approach to monetary policy after the financial crisis, and has argued for policies that could lead the central bank to act more aggressively in the next crisis.

Janet L. Yellen, the former Fed chairwoman whom Mr. Williams succeeded as president of the San Francisco Fed, called Mr. Williams a leader on the central bank’s policymaking Federal Open Market Committee, known as the F.O.M.C.

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John C. Williams, chief of the Federal Reserve Bank of San Francisco, is reported to be a leading contender to head the New York Fed.CreditAndrew Mangum for The New York Times

“He’s a tremendous contributor to the Federal Reserve and the F.O.M.C., and has done influential research on monetary policy,” Ms. Yellen said.

But Mr. Williams’s possible appointment — which isn’t yet final and could still change — drew swift criticism from a variety of Democratic lawmakers, progressive groups and left-leaning economists. They raised concerns about his record as a banking regulator and as a policymaker, and also criticized the search process for a lack of transparency.

“The New York Fed should go back and restart their search now,” said Andrew Levin, a Dartmouth College economist who spent 20 years at the Fed.

A New York Fed spokesman declined to comment. But in a statement this month, the leaders of the bank’s search committee said they had solicited comment from a variety of groups and had interviewed a range of candidates.

In recent years, progressive groups have put increasing pressure on the Fed to diversify its leadership and to become more responsive to public concerns about inequality, slow wage growth and other issues that are outside its traditional mandate of ensuring maximum employment and stable prices. The effort has scored some notable victories, including the appointment last year of Raphael W. Bostic in Atlanta as the first African-American president of a regional Fed bank.

Mr. Dudley’s announcement last fall that he would step down represented the movement’s greatest opportunity yet. The president of the New York Fed, unique among the heads of the 12 regional banks, has a permanent vote on the F.O.M.C. and serves as the committee’s vice chairman. The New York bank also plays a crucial role in carrying out the Fed’s policies, and in overseeing many of the country’s largest financial institutions.

Those pushing for change had reason to hope their voices would be heard. In the past, the selection of Fed presidents has been heavily influenced by the financial institutions that are formally the stockholders of the Fed’s regional banks. But the regulatory overhaul after the financial crisis removed the banks’ representatives from the selection process. One of the two leaders of the search for Mr. Dudley’s successor is Sara Horowitz, who runs the Freelancers Union, a labor organization. The other, Glenn Hutchins, is a private equity investor.

In early March, several dozen protesters marched to the New York Fed’s headquarters in Lower Manhattan to demand an appointee representing workers’ interests. Standing outside the Fed’s imposing stone building on Maiden Lane, Shawn Sebastian, director of the Fed Up campaign, which seeks to make the central bank more responsive to labor concerns, said the board could “make history” by appointing someone without Wall Street ties.

“The New York Fed president is the most powerful person in the country that Donald Trump does not get to pick,” Mr. Sebastian shouted to the crowd.

Mr. Williams would meet such demands in certain respects. He has spent nearly his entire career inside the Federal Reserve system and, unlike Mr. Dudley, the former chief economist for Goldman Sachs, he has never worked in the finance industry.

But Mr. Williams does not have extensive regulatory expertise, and the experience he does have may not help him. He was president of the San Francisco Fed while Wells Fargo, which is based in San Francisco and is partly under the local Fed’s supervision, engaged in aggressive sales practices that resulted in the opening of millions of accounts without customers’ knowledge.

In a statement Monday, Senator Elizabeth Warren, Democrat of Massachusetts, said Mr. Williams’s record in San Francisco “raises several questions, including about his fitness to supervise Wall Street banks.” She said the Fed’s Board of Governors, which must approve appointments, shouldn’t do so for Mr. Williams unless he testifies before the Senate Banking Committee, which has no formal role in the selection process.

Fed insiders said Mr. Williams played at most a limited role in the supervision of Wells Fargo, which is primarily overseen by regulators in Washington. Bank supervision would be a much bigger part of his job if he moved to New York. But Donald Kohn, who served as vice chairman of the Fed’s Board of Governors during the financial crisis, said Mr. Williams would hardly be the first president without substantial regulatory experience. Mr. Dudley’s predecessor, Timothy F. Geithner, for example, served in a variety of government roles before joining the Fed, but had never supervised banks.

“He’s been sitting in all these Open Market Committee meetings where increasingly financial stability issues are being talked about,” Mr. Kohn said of Mr. Williams.

But critics said selecting Mr. Williams would be a missed opportunity to bring in a new perspective. In a commentary for Bloomberg View on Monday that never mentioned Mr. Williams, Senator Cory Booker, Democrat of New Jersey, noted that the New York Fed has never had a woman or a person of color as its leader.

“If we’re serious about creating an inclusive and sustainable economy, no one should be left on the sidelines,” Mr. Booker wrote.

A version of this article appears in print on , on Page B1 of the New York edition with the headline: Pressure for Something Different at the Fed. Order Reprints | Today’s Paper | Subscribe